Businesses remain under pressure to cut costs in 2013

Businesses will continue facing discounting pressure with a new survey showing executives singling out demand for their products as the main barrier to growing their business this year. But expectations for improved profits – even if off the back of heavy cost-cutting – are higher.

The latest Dun & Bradstreet’s National Business Expectations Survey of 1,200 business owners and senior executives across Australia shows the outlook for selling prices during the first quarter of the year fell to a historic low. The selling price expectation index fell three points – its lowest level since the data was first analysed by D&B in 1988. It’s also 26 points below the 10-year average index.

These lower selling expectations are matched by survey findings that more than 57 per cent of businesses report demand for their products is the main barrier to growing their business this year.

“The sharp fall in expected selling prices points to very low inflation outcomes for both the December and March quarters,” he says. “The economy is clearly in a temporary lull, with the key question as we move into 2013, ‘is monetary policy sufficiently easing to spark stronger activity through the year?”

The survey also shows expectations for both sales and inventory levels are down from the previous quarter. The D&B sales expectations index reduced 14 points from a relative high in the previous quarter, to 19. It’s now seven points above the 10-year average index of 12.

Businesses are also looking to hold less stock in anticipation of sluggish spending activity – the inventory index is down eight points to an index of 16.

The outlook for capital investment shifted only marginally, and employment expectations remain flat, with the D&B index sitting at the 10-year expected index average of one for the second consecutive quarter.

But when it comes to profits, expectations are up. The survey shows expectations went up three points to an index of 23, the highest in eight quarters and now 18 points above the 10-year average.

Other issues that are expected to impact on operations in the March quarter include:

• 25 per cent of businesses surveyed say interest rates will be their biggest barrier to growth in the year ahead.

• 42 per cent of businesses see fuel prices as having the greatest influence on their operations in the quarter ahead – up 3 points from last month.

• 31 per cent of businesses believe online selling by their competitors will have a small adverse affect on their operations – up 11 points from last month.

When it comes to actual results for the September 2012 quarter, while profits were up, capital investment took a battering.